Main Resolution of the 12th National Congress in December 1999

Workers of all countries, unite!

Introduction

THE twelfth Congress of the New Communist Party of Britain meets
at a time of deepening capitalist crisis and imperialist war. The developments
since 1997 emphasise the terminal character of the world capitalist system.
The crises which unfolded in Asia and Latin America are a continuation
of the struggle between the US, Japan and the European Union (EU)
over who will dominate the world. This imperialist rivalry has gone on
for over a century and resulted in war and oppression at the expense of
the working class of the developed countries and the peoples of the of
the developing countries.

The effects of the world crisis are uneven and the responses of the
ruling classes and their representative bodies to protect their own wealth
and power have led to a degree of temporary recovery, as measured
by their own economic criteria and has seen the US increasingly taking
on the role of the "economy of last resort".

The chief symptoms of the changes that have marked the period from July
1997 have been in South East Asia, Russia and Latin America, particularly
in Brazil. The causes of the crisis in all these economies can all be traced
to the basic contradictions in the capitalist system. The consequences
have affected the more developed economies to the extent that not only
has forecast world economic growth been significantly slowed and trade
growth reduced by half from eight to four per cent but serious flaws have
been found in the financial and banking system, as witnessed by the collapse
of Japanese banks and the bail-out of the highly leverage hedge fund
Long Term Credit Management.

Unstable currencies, affecting even the US dollar and very high interest
rates in the crisis economies have been a factor in preventing quick recovery
in the countries worst hit. In their quest to increase their capital during
the boom phase of the cycle, the capitalists, unable to invest capital
profitably in more productive capacity, pour funds into the stock
markets and into real estate, bidding prices up to unsustainable levels
or if they still can't find profitable outlets at home send their capital
abroad. Thus capital prowls the world, looking for the next big thing.
A few years ago it was Latin America, especially Mexico, then Mexico crashed
and it became Asia's turn, Asia then collapsed with the distinct possibility
of a total collapse in Brazil and Russia.

This flight of capital began a process of steep devaluations in the
countries immediately concerned and competitive devaluations in numerous
other countries in a frantic effort to retain export levels and increase
trade with a view to offsetting the fall in demand in the home economies.
In contrast to the shortage of capital in many developing countries, there
is a glut of capital in the major imperialist countries whose owners are
seeking profitable outlets to invest in. This is a major reason for the
previous government's privatisation of former nationalised industries,
the refusal of the present Labour government to renationalise them and
the continuing efforts to privatise services such as the prison service,
some police operations and to make further encroachments on the Royal Mint,
Post Office, and the health and education sectors. This desperate search
for profitable outlets is also a factor in the rise of housing prices and
the purchase of housing to rent out.

Extending back further in time and concurrently with this, the leaders
of the developed countries, through the Organisation for Economic Co-operation
and Development (OECD), in alliance with the most powerful transnational
corporations (TNCs) , have striven through Multilateral Agreement on Investment
(MAI) to tighten their grip on the economies of all countries, in particular
those of the developing countries.

The terms of MAI, now in abeyance but not abandoned, were meant to ensure
investment rights for foreign capital that would have overridden the basic
laws of all countries. It shows that the monopoly capitalist organisations
are now seeking to divest themselves of any restriction by capitalist states.
The ambitious character of the proposed agreement eventually ensured that
it became unacceptable to many countries. It is, nonetheless, a warning
to the world's working class of the future agenda of the world monopoly
capitalism. It is driven by its quest for ever greater profits in pursuit
of monopoly capitalism's basic raison d'être the accumulation
of capital as an end to maintain its competitiveness.

The battleground for foisting the provisions of the draft MAI has now
moved to the World Trade Organisations (WTO). Imperialism will now attempt
to ensure that the terms of the MAI will be realised through the WTO.

The ever increasing accumulation of capital from the exploitation of
the working class throughout the world has not resulted and will not result
in benefits for working people. The disparity between the aggregate values
of the products produced and the aggregate purchasing power in the market
to buy them is constantly widening as the rate of exploitation increases.

The more specific localised crises in the capitalist world economy have
occurred at its weakest points and although the effects on the strongest
economies of the developed countries can easily be discerned, their huge
reserve resources, both in terms of organisation, administration and in
economic values and capital, enable them to stave off, at least for the
time being, a full-scale world recession. This underlines the fact that
it is imperative for the world capitalist system that economic growth is
sustained at its current average level in the coming period if a world-wide
slump is to be avoided.

The strategic centre of the world economy is without question the United
States. Its vast stock of accumulated capital and its huge market for consumer
goods and services, together with the role it plays as a recipient of foreign
investment, makes it the engine of the economy of the whole world.
The common fallacy among the apologists of capitalism is that the boom-bust
behaviour of the system has been tamed. They claim this is shown by the
seven year crisis-free, uninterrupted low-inflation growth of the US economy.
The British social-democrats project this theory when they claim they are
establishing sound economic fundamentals in the British economy.

In this situation sound economic practice for the monopoly capitalist
means maintaining low growth, low inflation GDP by the close monitoring
of fiscal policy. Interest rates are adjusted up and down depending on
the speed of growth of the economy. High interest rates inhibit economic
growth by retarding investment in the wealth-creating economy which increases
unemployment and bumps down wage levels by discouraging wage demand.

High interest rates result in reduced economic growth and high
unemployment which leads to a low rate of inflation. For the working class
everywhere this means continuing insecurity through fear of, or actual
unemployment, minimum or reduced real wages for the individual worker,
and a low-level of aggregate wages, thus the variable element of capital
(wages)is greatly reduced whilst the constant element of capital (instruments
of labour and technological processes) increases significantly through
the increased investment in new technology which then leads to a further
increase in the ratio of constant capital to variable capital (organic
composition of capital) and a reduction in the rate of profit and an increase
in the rate of exploitation and rate of capital accumulation. Ever-increasing
rates of exploitation are synonymous with the increased rate of capital
accumulation.

The increased rate of exploitation exacerbates the effects of the basic
contradiction of capitalism and guarantees in the long term, its deepening,
though uneven, development of its general crisis.

There are some apparent contradictions in the economies of the developed
countries, including the United States and Britain. Unemployment levels
have been reduced from their previous higher levels by the so-called
de-regulation of the labour market. This, however, has been done by substituting
the better paid jobs which had generally better working conditions by low
waged insecure jobs. The cost of labour or aggregate wage bills have therefore
been kept at a low level without recourse to negative economic growth.

Low public spending involving a low social wage and low public service
wages is part of their strategy. There is a systematic long term plan aimed
at reducing the state's involvement in the provision of the social wage
while transferring the responsibility to the individual.

An example is the promotion of private pension schemes, which put added
investment capital into private hands and are a significant source of profit,
creating ever greater accumulation of capital in the hands of the capitalists
with which to bolster the system. This is part of the drive towards the
total privatisation of the economy.

Promoting private pension schemes is an essential part of the theory
that market forces must be given maximum free rein. In essence it means
that economic values previously devoted to the working class are now being
transferred to capital and to the increased capital accumulation needed
by the monopoly capitalist to compete in the increasingly fierce struggle
for the relatively shrinking markets.

The boom and bust cycles have a tendency to be smoothed down based on
the relative strength of the labour movement. Workers are, by and large,
able to resist wage cuts and can continue to obtain wage increases despite
business slow downs. The automatic stabilisers, notably social insurance
payments and progressive income tax which go towards funding state welfare,
tend to dampen down cyclical fluctuations. None of these were yielded out
of the wisdom of the capitalists, but rather as reluctant concessions to
the increased organised strength and struggles of workers and other anti-monopoly
forces. As has already been demonstrated, the capitalists are always seeking
ways to whittle down or do away with these concessions and put the main
burden of income tax payments on wage and salary workers.

All this comprises a mortal crisis of world capitalism which cannot
be resolved except with the demise of the system. Attempts to suppress
one aspect of this general crisis, when successful, lead only to more severe
eruption of another aspect.

As rate of profit has reduced in the production of manufactured
goods, an ever greater proportion of the values traded are now in the financial
sphere - derivatives. While asset inflation has increased in the equity
markets that funded the real wealth-creating economy in the recent period,
it has increased much more in the financial economy. The financial derivatives
market only significantly started to develop in 1972, its aggregate size
in 1986 was $1.1 trillion, $10.2 trillion in 1990 $55.7 trillion in 1995
and was estimated to be $100 trillion in 1997. It should be pointed out
that the replacement value of derivatives - the measure of the commitment
of financial capital to a derivatives position - is between 2.5 per cent
and four per cent of the aggregate size, for example in 1997 the commitment
of finance capital on the estimated $100 trillion worth of derivatives
would at four per cent have been $4 trillion, is still more than the total
capitalisation of the top 30 banks and security houses. Many organisations
in entering the derivatives market will use leveraged capital, the use
of borrowed funds, to gain a proportionately greater interest in some financial
asset.

Trading in financial derivatives can be undertaken using many different
strategies such as short selling or holding long positions. Organisations
when short selling will commit to supply at a future date, securities which
are not currently owned. In a market where prices are declining, short
selling will enable the securities to be purchased at a lower price than
the agreed selling price, thus yielding a profit. Long positions are where
organisations have an abnormally large holding or exposure in particular
securities or currencies.

Large funds of capital are deployed in the process of accumulating finance
capital and in that of manipulating debt. Huge hedge funds are functioning
to provide highly leveraged investment funds taking long or short
positions and often exit positions abruptly, sometimes affecting price
trends and market sentiments. Even debt is a financial derivative where
credit instruments such as loans and bonds are traded in credit markets.
Nor is this on the periphery of the system but involves banks, TNCs, national
governments and local governments..

Since 1993 there have been at least 10 separate failures due to trading
in derivatives that have involved losses of more than a billion US dollars
each, of these 10 failures which include local governments, national governments,
manufacturers and banks. In the early 1990s Procter and Gamble the soap
manufacturers managed to lose $157 billion on a deal involving $200 billion
based on the tracking on US government bonds. During the present crisis
a special consortium was organised involving billions of dollars in a rescue
operation to save one of the hedge funds based in the US and to help stabilise
the stock market. This consortium involved 14 banks and shows the difficulties
now faced by which many financial institutions are large enough, should
they fail, to corrupt the whole financial system and need the combined
weight of a number of others to bail them out.

Financial derivatives are a necessary feature in a world economy that
is substantially run on debt. In all countries debt-financing of many kinds
is the norm taking the form of budget deficits, national debt, trade imbalance,
current accumulated deficit, personal sector debt and corporate debt. High
levels of interest are charged on this debt increasing constantly the stock
of finance capital in the system and it is highly profitable for the investors
in these funds.

Since 1945 monopoly capitalism has encouraged the development of a vast
network of agencies designed to impose co-operation between capitalist
states, particularly those of the leading industrialised states. There
is now a great disquiet within ruling class circles, at the efficiency
of these agencies the World Bank, International Monetary Fund (IMF),
OECD, the Group of seven conferences and many others, because the sophisticated
strategies adopted by governments have failed to stave off the ultimate
deep crisis of the system. Large packets of economic aid have been deployed
into the crisis countries of south-east Asia and Latin America. There are
increased western efforts to reduce -- rather than cancel across the board
-- the developing countries' debt. Thiis reflects a part of the concern
to prevent social and political turmoil which acts against, or makes untenable,
the "free market" pillaging of those countries' resources and wealth. Large
sums of aid are being held in readiness to assist Russia when a plausible
plan for reviving its economy can be devised. None of this has so far been
successful in bringing lasting economic stability to these countries.

Re-organisation of the IMF, but also of the financial system in its
entirety, is now suggested as a means of bringing discipline and greater
co-ordination among the financial monopolies, to control the export of
capital throughout the world. None of these will avail to bring in order
and collective responsibility into a system that is based essentially on
individual self-interest.

One of the most notable signs of the potential for chaos and disorder
can be seen in the challenge that for some time has existed to capitalist
state power by the big international monopolies. This is an example of
the contradiction in two of the main aspects of monopoly capitalism, the
state and the big economic monopolies each are essential to the other yet
challenge each other. The harnessing of these monopolies to a new system
of discipline is now a chief pre-occupation of capitalist states. Where,
previously, and today still, the state has been the instrument for the
continuous development of these monopolies' using the principle of the
utmost freedom of the market forces and ultimately of coercion of all opposing
factors, while not desirous of eliminating them, they now seek to limit
the powers of the state. At this stage in the evolution of capitalism it
can be seen that this is an insoluble contradiction.